“Greeninflation”: evidence on the channels of transition

Abstract

Purpose This paper aims to explore the role of two transmission channels between “green” transition and (overall and core) inflation, the so-called “greenflation” in the USA. The first channel is related to the “green” macroeconomic characteristics, and the second channel is associated with the “green” banking/financial characteristics of the US economy. Design/methodology/approach The empirical analysis spans the period 1990–2023, while it uses two-stage least square regressions and causality tests. The analysis is conducted across the full sample and sub-periods to assess robustness and structural shifts. Findings The findings through regression estimates and causality tests, clearly document that both channels (fiscal spending on renewables and “green” credit) impact inflation, validating the effect of “green” transition on inflation, with the “green” credit channel having the strongest effect, followed by the mechanism of “green” fiscal spending. Originality/value To the best of the authors’ knowledge, this study is the first to determine the primary channels through which the “green” transition impacts inflation. It offers first-time evidence on the role of fiscal spending on “green” transition and “green” credit on inflation.